LONDON — Oil prices fell by around $5 a barrel on Monday as investors pinned hopes on diplomatic efforts by Ukraine and Russia to end their conflict, while a surge in COVID-19 cases in China spooked the markets.
Brent was down by $4.62, or 4.1%, at $108.05 a barrel at 1152 GMT, and US West Texas Intermediate (WTI) crude fell $5.45, or 5%, to $103.88 a barrel.
Both contracts have surged since Russia’s Feb. 24 invasion of Ukraine and are up roughly 40% for the year to date.
Ukrainian and Russian negotiators are set to talk again on Monday via video link. Negotiators had given their most upbeat assessments after weekend negotiations, suggesting there could be positive results within days.
“Beside new talks between Ukraine and Russia, I guess new lockdowns in China are the reason for a negative start of the week for crude oil,” said UBS analyst Giovanni Staunovo.
China, the world’s largest crude oil importer and second largest consumer after the United States, is seeing a surge in COVID-19 cases, as the highly transmissible Omicron variant spreads to more cities, triggering outbreaks from Shanghai to Shenzhen.
Its daily new case load figures have hit two-year highs, with 1,437 new confirmed coronavirus cases reported on March 13.
“This week, market participants are closely tracking how Russian oil exports are evolving. So far this month oil flows had not been disrupted,” Staunovo added.
Russia’s output of oil and gas condensate rose to 11.12 million barrels per day (bpd) so far in March, two sources familiar with oil production data told Reuters, despite sanctions on Russian oil.
India is also considering taking up a Russian offer to buy its crude oil and other commodities at discounted prices with payment via a rupee-rouble transaction, two Indian officials said.
The United States has announced a ban on Russian oil imports and Britain said it would phase them out by the end of the year. Russia is the world’s top exporter of crude and oil products combined, shipping around 7 million bpd or 7% of global supplies .
British Prime Minister Boris Johnson is trying to persuade Saudi Arabia to increase its oil output, a senior minister said, following reports that Johnson would travel to the OPEC heavyweight this week.
International Energy Agency (IEA) chief Fatih Birol on Monday urged oil-producing countries to pump more to stabilize markets.
“Oil prices might continue moderating this week as investors have been digesting the impact of sanctions on Russia, along with parties showing signs of negotiation towards (a) ceasefire,” said Tina Teng, an analyst at CMC Markets.
Oil prices also came under pressure after India said it will take “appropriate” steps to calm the rise in oil prices, indicating the country could release more oil from its national stocks if required.
Investors are also closely watching the US Federal Reserve meeting this week. The Fed is expected to start raising interest rates, which would boost the dollar and put downward pressure on oil prices.
Oil prices typically move inversely to the US dollar, with a stronger greenback making commodities more expensive for holders of foreign currencies.
(Reporting by Bozorgmehr Sharafedin in London, additional reporting by Emily Chow in Beijing, Stephanie Kelly in New York; editing by Susan Fenton and Jason Neely)